Chemicals Limited Vs. The Collector of Central Excise  INSC 543 (9 May 1997) SUHAS C. SEN, K.T. THOMAS
appellant, IDL Chemicals Limited, manufactures explosives at its factory at Sonaparbat.
The raw materials for explosives are obtained from diverse sources. The
finished goods are sold in the following manner:-
Goods which are sold to customers like Coal India Limited.
Goods sold to public sector companies and Government undertakings.
Goods which are sold to ordinary customers who do not have long term contract.
Goods which are transferred from the factory premises to various magazines
outside the State of Orissa which ultimately are sold to
persons enumerated in categories (i) and (iii).
is no dispute that the goods are sold to Coal India Limited and Government
undertakings at a rate much lower than the rate charged for the goods sold to
ordinary customers who do not have any long term contract with the appellant.
is also no dispute that excise duty is paid at the factory gate on the basis of
three different prices:-
The price paid by Coal India Limited.
little higher price paid by public sector companies and Government
Goods sold to ordinary customers at a much higher rate.
valorem duty is imposed separately on the three types of sales made by the
appellant. There is no dispute on these sales.
50% of the goods manufactured by the appellant are not sold at the factory
gate, but are transported to various magazines outside the State of Orissa. From these magazines the goods are
ultimately sold to Coal India Limited, Government undertakings and also to
other customers. There is also no dispute that bulk of the goods are purchased
by Coal India Limited at a low rate. Ordinary purchasers have to pay a much
dispute in this case is about the excise duty which has to be paid at the time
of removal of the goods from the appellant's factory outside the State of Orissa to its magazine.
procedure followed by the appellant was to calculate the duty on the basis of
the price usually paid by Coal India Limited. The appellant used to execute a
bond under Rule 9-B of the Central Excise Rules, 1944 and pay the duty
provisionally on the basis of its own calculation on this basis. As and when
sales ultimately took place, if any higher price was realised the differential
duty was paid by the appellant. On behalf of the appellant, it is contended
that there is no allegation of any suppression of fact or avoidance of tax by
the appellant. The appellant following this procedure has from time to time
paid whatever duty was payable by it.
further been contended on behalf of the appellant that the duty is to be paid
on the "normal price", as contemplated by Section 4(1) of the Central
Excise Act, 1944. The "normal price" is a price at which the goods
are usually sold to the wholesale dealers. There is no dispute that in this
case the bulk of the goods produced by the appellant are sold to Coal India
Limited. When the goods are not being sold at the factory gate and are being
taken to various magazines all over the country, the question of determination
of "normal price" of these unsold goods arises. The "normal
price" in this case will have to be found by reference to the price at
which the goods are sold to Coal India Limited, which according to the
appellant consumes nearly 90% of the goods produced by the appellant.
is no reason to calculate normal price to be anything but the price usually paid
by Coal India Limited. It has further been contended that the Act contemplates
a provisional assessment and final assessment. The assessee provisionally paid
taxes when the goods were removed from factory gate to the godowns and finally
paid the tax when the final assessment was made. The procedure followed by the assessee
was accepted and acted upon by the excise authority for a number of years.
There was no reason to interfere with this practice.
behalf of the respondent it was pointed out that so far as the sales to Coal
India Limited and Government undertakings are concerned, the assessee has filed
price lists at the time of removal of goods at the factory gate and tax was
levied accordingly. Similarly, when the goods were sold to other customers
whatever price list had been filed by the assessee was approved and goods had
been taxed accordingly. But when goods were despatched to different consignment
agents in various parts of the of the country who stored the goods in magazines
there, no price list was filed by the assessee. At the time of removal from the
factory, the goods were not earmarked for sale to any particular buyer. The assessee
did not represent that these goods were meant to be sold to Coal India Limited
or a Government purchaser at a stated price. No price list was filed by the
appellant at all. Since there was nothing to indicate that the goods were meant
to be sold to Coal India Limited or a Government undertakings the price at
which the assessee sold the goods to private buyers at the time of removal of
goods from the factory was treated as the "normal price" of the
of the view, the contention of the respondent must be upheld. The assessee has
failed to make any declaration as to the price of the goods despatched by it to
its various agents outside the State. At the point of time of removal of the
goods, the assessee was not in a position to say that the goods were meant to
be sold to Coal India or any other Government
undertaking. The duty had to be calculated at the point of time of removal of
the goods. At that point of time, the only way the duty could be levied was by
calculating the duty on the basis of sales made to independent customers and
not a special customer like Coal India. Even if ultimately and at a much later date from the date of removal
of the goods, the appellant sold the goods to a Government Company or to Coal
India Limited, the liability to pay duty at the time of removal of goods from
the place of manufacture will not be altered. Rule 9-A of the Central Excise
Rules lays down that no excisable goods shall be removed from any place of
manufacture until the excise duty leviable thereon has been paid. Rule 9-A also
lays down that the rate of duty shall be the rate in force on the date of
actual removal of goods from the factory.
is a special rule for warehousing the goods which does not apply to this case.
The appellant did not file any price list in connection with these goods which
were being sent to the consignment agents. The assessee was unable to make any
statement that the goods were meant for sale to Coal India Limited or for any
Government Company. The Excise Officer was right in calculating the price which
would have been payable by an ordinary customer as the "normal price"
of these goods.
appeal, therefore, fails and is dismissed. There will be no order as to costs.